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Takeover Defenses Work.

Is That Such a Bad Thing?

Mark Gordon*

INTRODUCTION

In The Powerful Antitakeover Force of Staggered Boards: Theory,

Evidence, and Policy,1 Professors Lucian Arye Bebchuk, John C. Coates IV,
and Guhan Subramanian (BC&S) purport to demonstrate that hostile takeover
targets that have a poison pill rights plan and an “effective” staggered board
can—“and most of the time do”2—remain independent rather than sell
themselves to the initial raider or another buyer. As presented, their findings
turn conventional wisdom on its head and justify, in their view, significant
“reconsideration” of the law regarding takeover defenses. Are they on to
something here? Should we, indeed, be shocked—shocked!—to learn that
takeover defenses work?
The BC&S Study has caused a minor stir among the tight knit group of
academics and M&A practitioners who have sparred over the efficacy of
takeover defenses on and off over the past twenty years.3 “Takeover defenses

* Mark Gordon is a partner in the mergers and acquisitions practice of Wachtell,

Lipton, Rosen & Katz. The opinions expressed here are those of the author, and do not
necessarily reflect the views of his firm. Mr. Gordon also coteaches a mergers and
acquisitions course each spring at New York University School of Law. He wishes to thank
Laura A. McIntosh for her helpful comments and suggestions. An early version of this
article appeared as Poor Study Habits, DAILY DEAL, June 20, 2002, at 16.
1. Lucian Arye Bebchuk, John C. Coates IV & Guhan Subramanian, The Powerful
Antitakeover Force of Staggered Boards: Theory, Evidence, and Policy, 54 STAN. L. REV.
887 (2002).
2. Id. at 890.
3. For a sample of this debate, see Martin Lipton, Takeover Bids in the Target’s
Boardroom, 35 BUS. LAW. 101, 130 (1979); Frank H. Easterbrook & Daniel R. Fischel, The
Proper Role of a Target’s Management in Responding to a Tender Offer, 94 HARV. L. REV.
1161 (1981); Ronald J. Gilson, A Structural Approach to Corporations: The Case Against
Defensive Tactics in Tender Offers, 33 STAN. L. REV. 819 (1981); Lucian Arye Bebchuk,
The Case for Facilitating Competing Tender Offers, 95 HARV. L. REV. 1028 (1982); Lucian
Arye Bebchuk, The Case Against Board Veto in Corporate Takeovers, 69 U. CHI. L. REV.

819
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820 STANFORD LAW REVIEW [Vol. 55:819

are good because they help decent, hard-working companies fend off
structurally coercive and opportunistically timed raids.” “No, they’re bad
because they discourage would-be acquirers from pursuing economic
efficiency-enhancing transactions.” “Yes, they’re good because they provide
companies with the time and the leverage to negotiate better deals from their
suitors.” And so on. Ultimately, the conventional wisdom—at least among
practitioners—has come around to a pragmatic view that in the “real world,”
the legal, practical, and economic considerations tend to even out in a rough
justice sort of way: that is, when a public company receives a hostile takeover
offer at a price that is attractive to a majority of its stockholders, it may
leverage its takeover defenses to get a better deal or find a better offer, but its
days of independence are probably numbered.
This is not mere theory. M&A lawyers routinely advise public company
boards that while the “just say no” defense4 exists as a legal matter, it may not
be available as a practical matter, especially in the face of a determined bidder
with a premium bid that is favored by a significant majority of stockholders.
The reason for this should be obvious. Public company directors represent, and
have a fiduciary duty to act in the best interests of, the company’s
stockholders.5 If someone makes a bid at a price that is attractive to a majority
of stockholders, directors will be pressured to (1) accept the bid (after
attempting to negotiate it upward), (2) find a better bid from another party, or
(3) take affirmative steps to show that the company can achieve greater value
through independent growth. If the directors cannot succeed at option (3)—and
do so in a hurry—the directors should expect to find it difficult to justify in

973 (2002) [hereinafter Bebchuk, The Case Against Board Veto]; Martin Lipton, Pills, Polls,
and Professors Redux, 69 U. CHI. L. REV. 1037 (2002) [hereinafter Lipton, Pills, Polls, and
Professors Redux].
4. The “just say no” approach, which is accepted in Delaware, should be contrasted
with the “just say never” approach, which is not. “Just say no,” which is perhaps better
characterized as “just say later,” refers to the ability of a board of directors to maintain
takeover defenses, such as a poison pill rights plan, as long as the directors believe it is in the
stockholders’ best interests to do so and subject to the ability of the stockholders to remove
the incumbent directors in an election contest and replace them with directors nominated by
the hostile raider. The development of the “just say no” defense is discussed in Bebchuk et
al., supra note 1, at 904-07. The “just say never” defense is a defensive scheme that is truly
impenetrable unless and until the incumbent directors determine to change course. An
example of this would be the so-called “dead hand” poison pill rights plan which, once
adopted, can be removed only by the incumbent directors, and not by directors nominated by
a hostile bidder. The “just say never” defense is not legal in Delaware. See Quickturn
Design Sys., Inc. v. Shapiro, 721 A.2d 1281, 1290-93 (Del. 1998) (invalidating a “delayed
redemption” or “slow-hand” rights plan, and, by extension, any “dead-hand” or “no-hand”
rights plan).
5. See, e.g., Unocal Corp. v. Mesa Petroleum Co., 493 A.2d 946, 955 (Del. 1985)
(“[O]ur analysis begins with the basic principle that corporate directors have a fiduciary duty
to act in the best interests of the corporation’s stockholders.”); Guth v. Loft, Inc., 5 A.2d
503, 510 (Del. 1939).
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Dec. 2002] TAKEOVER DEFENSES WORK 821

their own minds (and to stockholders, in court, and in the court of public
opinion) that remaining independent is in stockholders’ best interest. This logic
is thought to apply with equal force to companies with staggered boards6
because if a raider were to succeed in removing one-third of the directors and
replacing them with directors friendly to the raider, the remaining directors
would be expected to fold rather than continue to hold out against the expressed
preference of the stockholders whose interests the directors are supposed to
represent. The point of the advice is not that directors must or even should fold
when faced with a hostile bid, but that directors should be under no illusion that
the fabled concept of “just say no” somehow changes the nature of their
obligation to act in the manner they reasonably believe to be in the best interest
of stockholders.
That is how the balance works, or is thought to work, in practice. As a
legal matter, the balance works something like this: A target board of directors
may maintain a poison pill defense and effectively block a hostile takeover as
long as the directors continue to believe that doing so is in the best interests of
stockholders and as long as the directors actually remain in office. The BC&S
Study correctly points out that since the Delaware Supreme Court’s decision in
Paramount Communications, Inc. v. Time, Inc.7 no Delaware court has ever
ordered a board of directors to redeem its poison pill.8 Therefore, the bidder
can only be sure of obtaining control over the target directors’ objections if the
bidder can wage an election contest to remove the incumbent directors and
replace them with ones that will redeem the pill. BC&S call this the “ballot
box safety valve.”9 BC&S argue that companies with an effective staggered
board (ESB)10 are essentially immune to the removal threat because virtually
no bidders are willing to commit themselves to or to endure the minimum delay

6. The concept of a staggered board is well explained by BC&S:

The default law in all states requires that all directors stand for election at each annual
shareholder meeting. However, all states provide an exemption from this requirement if the
board is staggered. In a company with a staggered board, directors are grouped into classes
(typically three), with each class elected at successive annual meetings. For example, a
board with twelve directors might be grouped into three classes, with four directors standing
at the 2001 annual meeting, four more directors standing for reelection in 2002, and the
remaining four directors standing for reelection in 2003. With three classes, directors in each
class would be elected to three-year terms.
Bebchuk et al., supra note 1, at 893.
7. 571 A.2d 1140 (Del. 1989).
8. Bebchuk et al, supra note 1, at 906.
9. Id. at 890, 903, 907.
10. A target is said to have an “effective staggered board” if it has a staggered board,
with at least three classes of directors, and is not capable of being dismantled such that it is
possible to obtain control of a majority of the board in fewer than two annual election
meetings. In particular, target shareholders must not have the ability to act by written
consent in lieu of a meeting, to call a special meeting, to remove directors without cause or
to “pack the board” by increasing the number of directors and filling the vacancies created.
Bebchuk et al., supra note 1, at 910, 912-13.
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822 STANFORD LAW REVIEW [Vol. 55:819

of at least one year created by the ESB. Therefore, in their view, the ballot box
safety valve is illusory for an ESB target. Whether this is true, or whether in
fact the ESB—which provides a clear (but lengthy) path to victory—actually
helps set precisely the right balance depends in significant measure on whether
the conventional wisdom described above is correct. Can boards be trusted to
make the right choice, even if they have the freedom not to?
The BC&S Study says the conventional wisdom is wrong, and that boards
cannot be trusted if protected by an ESB defense. Unfortunately, there is less
to the Study’s empirical findings than meets the eye, and, as a result, the Study
fails to convince on its key points and fails to convince that the broad,
inflexible new rule BC&S would propose is indeed more appropriate and more
value-enhancing than the existing balance of power. It also fails to convince
that it has accomplished anything other than to identify the extreme exceptions
to a set of rules that otherwise works just fine.
The following proceeds in three Parts. In the first, I identify a handful of
analytical problems with the Study intended to demonstrate that the Study
provides an insufficient foundation for its broader conclusions and policy
prescriptions. In the second, I look at BC&S’s broad and inflexible policy
prescription—that the ESB effect be taken away from public company boards
in the takeover context11—and argue that, to the contrary, ESBs can be and
often are used in a responsible and value enhancing manner, and that before we
take away or lessen the effectiveness of these tools for everybody, we ought to
invest some effort to find a more focused solution that separates the users from
the abusers. In the third, I offer a short conclusion in which I argue that the
BC&S Study has not succeeded in proving either that (1) the costs of ESBs
outweigh the potential benefits, particularly when we move from considering
the effect of the background legal rules only on hostile takeovers to considering
their effect on all public company merger and acquisition activity, or (2) a
broad, inflexible rule that upsets the existing balance of power between bidders
and targets is, in fact, necessary, especially when more focused solutions may
be available. Because of these shortcomings, all the BC&S Study really
succeeds in proving is that ESBs work very well. Maybe this is not such a bad
thing after all.

I. ANALYTICAL CONCERNS

The BC&S Study contains three basic findings. The first is that companies
with an ESB are much more likely to remain independent after receiving a

11. Specifically, they propose that “after the loss of one election that is effectively a
referendum on the offer, incumbents should be required to redeem the [poison pill rights
plan] and allow the bidder (whose offer has received shareholder support) to proceed with its
bid.” Id. at 944-45. In other words, for takeover purposes, every staggered board would be
turned into a “straight” or annual term board.
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Dec. 2002] TAKEOVER DEFENSES WORK 823

hostile takeover bid than are companies without an ESB.12 Specifically, of

ninety-two companies that were the targets of hostile takeover bids from 1996
through 2000, those that had an ESB remained independent roughly half of the
time, or about twice as often as those without an ESB.13 Second, remaining
independent in the face of a hostile bid makes stockholders worse off compared
with selling to the initial suitor or to another buyer.14 Third, the aggregate
harm to stockholders of those companies that receive hostile takeover bids but
remain independent because of an ESB outweighs any countervailing benefit
(in the form of an increased premium) to stockholders of hostile takeover
targets that allow themselves to be acquired, but, perhaps, use the ESB to get a
better price.15 Based on these findings, the Study concludes that the presence
of ESBs reduces overall returns for stockholders of hostile bid targets.16
A powerful conclusion, to be sure, but there are a few problems.17 The
first is that the authors stack the deck in favor of their conclusion by using an
overly narrow data set. The Study looked at ninety-two hostile (unsolicited)
bids from 1996 to 2000. But if what we are doing is trying to determine
whether adopting an ESB is a good thing or bad thing for public companies in
general, there is no particular basis for limiting the data to hostile transactions.
The BC&S Study points out that ESBs have a negative effect on stockholder
wealth because they allow hostile takeover targets to remain independent more
often, and remaining independent, according to their data, is “generally rather
bad for target shareholders.”18 But, as the BC&S Study also points out, ESBs
also have (or may have) a positive effect, in that ESBs provide target managers
greater bargaining power to negotiate a higher price (usually thought of as a
higher premium to the target’s pre-bid trading price) from the acquiror in those
cases where the target company does not remain independent.19 The
overlooked point is that if ESBs give targets additional leverage to negotiate a
better premium in hostile transactions, it stands to reason that ESBs should
have the same effect in friendly transactions as well (because the target can
more effectively counter the acquiror’s implicit threat to “go hostile” if its
various demands are not met). Therefore, before drawing any conclusion about
the overall effect of ESBs on shareholder value, BC&S need to look at all deals

12. Id. at 929-33.

13. Nine months after the initial bid, 60% of ESB targets remained independent versus
34% for non-ESB targets. Thirty months after the initial bid, 47% of ESB targets remained
independent versus 23% for non-ESB targets. Id. at 930, 933.
14. Id. at 934-36.
15. Id. at 935-36.
16. Id. at 936-39.
17. The BC&S Study authors have not made available, and this author has not had
access to, the data underlying the BC&S Study, including the list of the 92 hostile takeover
bids reviewed.
18. Bebchuk et al., supra note 1, at 935.
19. Id.
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824 STANFORD LAW REVIEW [Vol. 55:819

in any given time period to determine whether companies with ESBs receive
higher premiums than those without. If so, the aggregate benefit of ESBs
would almost certainly overwhelm any loss associated with any lower
likelihood of being acquired in a hostile bid, and would mean that BC&S’s
conclusion about the effect of ESBs on stockholder value would be 180 degrees
wrong.
Because friendly deals far outnumber hostiles (3038 to 92 in the 1996-2000
period covered by the Study20) this point would be true even if the negotiating-
leverage benefit were quite small, as BC&S contend.21 I suppose one could
question whether it exists at all, but it seems an impossible feat of logic to
argue, on the one hand, that ESBs present “a serious impediment to a hostile
bidder seeking to gain control over the [incumbent directors’] objections”22 and
are “extremely potent as an antitakeover device,”23 while at the same time
arguing that, on the other hand, boards are unable to use this extremely potent
force to extract a better price from any genuinely interested suitor.
Interestingly, the BC&S Study indicates that the bargaining power effect turns
out to be quite small as an empirical matter, though the sample size is too small
to draw definite conclusions. Specifically, they find that for successful bids,
the final acquisition premium (above the pre-bid trading price) is 54.4% for
ESB targets, and 49.6% for non-ESB targets—a 4.8% difference that they
argue is not statistically significant.24 One implication of this, which the
BC&S Study does not explore, is that the incremental deterrent effect of an
ESB may not be nearly so extreme as BC&S argue, at least relative to an
“effective annual term” (EAT)25 target (as opposed to all non-ESBs).26 In any
event, the fundamental point remains that even a 4.8% benefit (or even a
fraction of that) applied over thousands of friendly deals amounts to a massive
net benefit to stockholders of companies that employ an ESB.
This is a benefit that can be and should be measured, and, in fact, a similar
approach has been used in a number of studies of the effectiveness of the so-
called “poison pill” rights plan. These studies, which look at the takeover
premiums received by the target company in all deals in a given period (both
hostile and friendly), have determined that companies that have these plans in

20. Based on 3130 transactions involving publicly traded U.S. companies during the
relevant period, as reported in MERGERSTAT REVIEW 2001, at 6 tbls.1-3, less the 92
transactions identified as hostile by BC&S.
21. Bebchuk et al., supra note 1, at 935-36. Because the largest deals by dollar value
have historically been friendly rather than hostile, the conclusion would likely be even more
pronounced if the analysis were done on a dollar-weighted basis (rather than on average
returns), which BC&S have not done.
22. Id. at 890.
23. Id. at 903.
24. Id. at 935-36.
25. See infra note 31.
26. See infra text accompanying notes 36-38.
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Dec. 2002] TAKEOVER DEFENSES WORK 825

place prior to receiving a bid ultimately receive substantially higher takeover

premiums than those that do not have them.27 Professor Coates has argued
elsewhere that these studies are flawed, at least with respect to poison pill
effectiveness, because every public company board has the ability to adopt a
poison pill in response to a hostile bid, and therefore every public company
should benefit from the additional premium attributable to the poison pill, even
if the company does not actually have a poison pill in place pre-bid.28 In other
words, there is no meaningful distinction from an antitakeover perspective
between a company with a pre-bid poison pill and one without. This analytical
infirmity would not exist in a similar study of ESB effectiveness because it is
not true that a public company board can transform itself into an ESB after a
hostile bid has been received. Therefore, the pre-bid presence or absence of an
ESB provides a meaningful distinction among acquisition targets and makes it
possible to determine whether ESB companies receive higher takeover
premiums than do non-ESB companies.
A second problem with the BC&S stockholder return analysis is that in
concluding that hostile takeover targets that remain independent experience
inferior returns compared to targets that sell out, the Study fails to correct for,
or take into account, the harm done to the target by the hostile bid itself. The
fact of having received a hostile bid—and more generally any protracted period
of uncertainty that surrounds both hostile takeover fights and nonhostile merger
negotiations—can impose enormous costs on a target, wreak havoc with capital
budgeting and strategic planning, damage relationships with suppliers and
customers, and negatively affect employees uncertain about their future.29 In
other words, it is no wonder that the hostile bid targets that remain independent
tend to underperform in the months or even years following a bid when the bid
itself tends to have crippling effects.
From one perspective, it is perfectly appropriate not to correct for the
effects of the hostile bid and subsequent fight. In Professor Subramanian’s

27. See, e.g., Robert Comment & G. William Schwert, Poison or Placebo? Evidence
on the Deterrence and Wealth Effects of Modern Antitakeover Measures, 39 J. FIN. ECON. 3,
31 tbl.4 (1995); Georgeson Shareholder, Mergers & Acquisitions: Poison Pills and
Shareholder Value / 1992-1996 (Nov. 1997); J.P. Morgan & Co., Median Control
Premiums: Pill v. No Pill (July 1997).
28. John C. Coates IV, Takeover Defenses in the Shadow of the Pill: A Critique of the
Scientific Evidence, 79 TEX. L. REV. 271, 287-88 (2000).
29. See, e.g., Lipton, Pills, Polls, and Professors Redux, supra note 3 at 1059.
In general, a company that becomes the target of an unsolicited takeover bid must institute a
series of costly programs to protect its business during the period of uncertainty as to the
outcome of the bid. To retain key employees, in the face of the usual rush of headhunters
seeking to steal away the best employees, expensive bonus and incentive plans are put in
place. To placate concerned customers and suppliers, special price and order concessions are
granted. Communities postpone or reconsider incentives to retain facilities or obtain new
facilities. The company itself postpones major capital expenditures and new strategic
initiatives. Creditors delay commitments and seek protection for outstanding loans.
Id.
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826 STANFORD LAW REVIEW [Vol. 55:819

view, the question is: Once the hostile bid has been made, what should the
board do?30 If that is indeed the question, knowing that companies that have
received bids but remained independent experience inferior returns is obviously
very relevant. The problem with this view is that it turns every hostile bid into
a self-fulfilling prophesy. The very act of making the bid would appear to
thrust the target board into a decisionmaking realm where three Harvard
professors have produced statistical proof that the board should not, in the
exercise of its fiduciary duties, seek to remain independent. But surely the law
should not give force to this self-fulfilling prophesy. Even if one believes that
remaining independent is the inferior choice on average, it does not follow that
every takeover bid should be welcomed. This is, of course, exactly why
practitioners design takeover defenses not only to help fend off a raid once
begun, but to deter the hostile bid in the first place—to require any would-be
acquiror or merger partner to deal directly with the target board from the
beginning, rather than take a public and disruptive approach. BC&S would
probably say that they are not against takeover defenses generally, but instead
believe that poison pill and EAT31 provisions provide sufficient deterrent
effect, whereas an ESB is too powerful and goes too far. This seems to ignore
how negotiating power and leverage actually work in the real world. A
roadblock only works if there is no immediately easy way around it. An EAT
company—i.e., one with a complete panoply of takeover defenses other than a
staggered board—is completely vulnerable to a hostile takeover bid at least
once a year. This vulnerability explains why ESBs play an important role in
the balance of power even if the actual magnitude of the difference in
antitakeover effect between an EAT and an ESB is not very large on average.32
The presence of an ESB means the majority of directors cannot be removed on
little or no notice.33 Without ESBs, the balance of bargaining power between
bidders and targets gets tilted in favor of raiders, at least once a year. That the
balance should differ based upon the time of year is illogical at best. ESB
companies are harder to acquire at a price not approved by a majority of the
target’s directors than are non-ESB companies, and therefore it is logical to

30. Conversation with Guhan Subramanian, Assistant Professor of Business

Administration, Harvard Business School, in Cambridge, Mass. (April 25, 2002) (emphasis
added).
31. A company that has defenses that make it possible for an acquiror to replace the
target’s entire board of directors in an election contest in connection with the target’s annual
meeting, but make it impossible to do so at other times during the year, is said to have an
EAT defensive scheme. See Bebchuk et al., supra note 1, at 912.
32. Cf. id. at 901.
33. As a technical matter, the presence of an ESB requires an acquiror to endure a
delay of at least one year, and probably more, if it wants to acquire the target without the
consent of the incumbent board. Of course, that delay may be far less in practice: Unless
the incumbent directors determine that it is in the best interests of the stockholders to hold
out after losing one election, the difference between an EAT and an ESB is nil.
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Dec. 2002] TAKEOVER DEFENSES WORK 827

assume that ESBs (1) are in fact a useful tool for forcing would-be acquirors to
deal with the board, rather than “go hostile” and (2) provide the target board
with greater leverage to negotiate a better deal if a deal is in the best interests of
stockholders. The real question is whether public company directors can be
trusted to use the tool properly, a question I explore below. For purposes of my
current point, however, suffice it to say that treating the hostile bid as an
exogenous variable in the shareholder return analysis amounts to a second
instance of stacking the deck in favor of a particular result.
A third issue is that BC&S fail to distinguish among different types of
“hostile bids” in ways that are highly relevant to their analysis and that reveal
in yet another way that their undisclosed data set is stacked against ESBs.
Nearly half of the forty-five hostile bids in the Study made against ESB targets
were the weakest form of bid (the so-called “bear hug” bid), compared with
about 25% for non-ESB targets.34 A bear hug bid is an offer that is not
accompanied by either a tender offer or a proxy fight and often (though not
always) indicates a lower level of commitment and seriousness on the part of
the acquiror.35 Whether this is so in every case, it should be no surprise that
targets of all types (ESB and non-ESB) show a higher incidence of remaining
independent with respect to bear hug bids; and if there are twice as many bear
hug bids in the ESB data set, the overall incidence of remaining independent
will be unfairly inflated for ESBs.
A fourth issue, related to the previous two, is that although the BC&S
Study ultimately recommends that ESB targets be turned into EAT targets for
takeover purposes,36 the Study fails to make any assessment of whether an ESB
has a stronger antitakeover effect than an EAT.37 This is a particularly
puzzling omission because it would have been quite easy to do. (Certainly, it is
no harder than identifying the ESBs among the ninety-two targets in the
sample.) The BC&S Study purports to show that hostile takeover targets that
do not have an ESB remain independent less often than those with an ESB. But
not having an ESB is not the same thing as having an EAT. For all we know,
the greater incidence of selling among non-ESBs may be because companies
without an ESB may also lack other crucial antitakeover protections, such as a

34. Bebchuk et al., supra note 1, at 926 tbl.2.

35. A common saying among M&A lawyers is that all the bidder has committed to is
the cost of the postage stamp needed to mail the bear hug letter. This is not entirely fair, of
course, because the act of publicly stating one’s interest in a particular acquisition exposes
the acquiror to a number of risks (for example, a strategic acquiror may create the
irreversible perception among the investing public that it “needs” to do this deal in order to
execute on its growth plans), particularly if the target is large relative to the size of the
acquiror; however, experience does indicate that a fair number of “bear hug” bids really are
less serious than other types of bids.
36. Bebchuk et al., supra note 1, at 950 (“In effect, our approach would convert ESB
targets into EAT targets for takeover purposes . . . .”).
37. Id. at 912.
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828 STANFORD LAW REVIEW [Vol. 55:819

charter provision prohibiting stockholders from acting by written consent. This

is exactly what happened in the well-known case of IBM’s successful 1995 bid
for Lotus Development Corporation. Lotus found itself essentially defenseless
because its charter permitted stockholder action by written consent. It therefore
had neither an ESB nor an EAT, and it surrendered in less than a week.38 The
point here is not that there is no theoretical difference between an ESB and an
EAT; as I have said, ESBs solve a vulnerability problem of the EAT and
therefore make for a more complete defense that ensures the proper balance of
power at all points in time. The BC&S Study alleges, however, that
practitioners fail to appreciate the magnitude of this difference. It also implies
that ESBs are more highly correlated with “bad” decisionmaking than are
EATs. It is incumbent upon the authors to prove these points if they wish to
push them.
A fifth problem is BC&S’s failure to break out from their analyses the
results solely for Delaware targets. The BC&S Study’s analyses and policy
prescriptions are grounded in and directed toward Delaware statutory and case
law.39 In particular, BC&S’s policy prescription—that public company boards
should not be allowed to wield the ESB defense—arises from the authors’
belief that their Study disproves a key factual assumption upon which Delaware
takeover jurisprudence is based, namely, the existence of a “ballot box safety
valve,”40 which, they argue, is “illusory” in the case of a company with an
ESB.41 However, only about half of the targets in the BC&S Study (forty-
seven out of ninety-two) were Delaware corporations subject to Delaware
law.42 For all we know, the lower incidence of independence for ESB targets
may have been concentrated in other jurisdictions with different legal features
that help explain the results. Therefore, it would be interesting to know
whether any of the Study’s principal findings would change if only the forty-
seven Delaware targets were included in the sample set.43 In particular,
looking only at Delaware targets, do those with ESBs remain independent in

38. Bizarrely, BC&S cite this as an example of how the ballot box safety valve works
effectively, even though (1) Lotus had essentially no time to find and negotiate a better
transaction, (2) no stockholder vote was held, and (3) Lotus had no leverage to negotiate a
better price. Id. at 911. While IBM did raise its initial bid by $4, it most likely did this in
order to obtain swift negotiating access to Lotus’s top software developers who represented
Lotus’s most valuable assets.
39. See, e.g., id. at 944 (“We focus on the corporate law of Delaware, the most
important law domicile for U.S. corporations, and on solutions that can be implemented
taking as given the existing structure of Delaware case law.”).
40. Id. at 945.
41. Id. at 890.
42. Id. at 926 tbl.2.
43. Targets from states that expressly follow Delaware fiduciary duty law as it relates
to takeovers could also be included.
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Dec. 2002] TAKEOVER DEFENSES WORK 829

the face of hostile bids more often than those that do not? And is the difference
statistically significant?
A sixth and last problem I will mention is that BC&S assume that in each
case where the hostile bid target remained independent, independence was
achieved over the objection of stockholders. Unless BC&S want to posit that
stockholders favor any and every takeover bid regardless of price and timing—
which I assume they would not, because it undermines their argument that
stockholders are adequate guardians of their own interests, at least as to matters
of price, and therefore directors should yield to the stockholders’ expressed
preference44—there must have been cases where remaining independent was
the preferred choice of both the directors and stockholders or where
stockholder choice was not patently clear. While it is unlikely that removing
these cases would reverse the findings, the number of these cases is worth
knowing because when we are dealing with a sample size that is already quite
small compared to the universe of M&A activity,45 removing from the sample
those instances where there was no divergence of preference between the board
and stockholders would help us to determine whether BC&S have really proven
that the existing rules don’t work, or merely that the existing rules work for all
but a very small number of exceptional cases.

II. DO WE REALLY NEED THE BROAD INFLEXIBLE NEW RULE OF DIRECTOR

BEHAVIOR AND JUDICIAL INTERVENTION THAT BC&S PROPOSE?

Not only do BC&S fail to prove that their basic conclusions would be
correct if the data were analyzed in the correct way, they compound the
problem by proposing a policy reconsideration far grander than the underlying
support can bear. In particular, they want us to conclude that ESBs are
somehow correlated with “bad” decisionmaking by some boards, and therefore
the ESB defense should be taken away from every board in every instance (at
least in the takeover context). They do this by proposing that the law
should not allow [directors]46 to continue blocking a takeover bid after they
lose one election conducted over an acquisition offer . . . . [A]fter the loss of
one election that is effectively a referendum on the offer, incumbents should
be required to redeem the [poison pill rights plan] and allow the bidder (whose
offer has received shareholder support) to proceed with its bid.47

44. See, e.g., id. at 944-45.

45. The difference between the number of ESB companies in the sample that remained
independent and the number of non-ESB companies in the sample that remained independent
is just 11 in the short run, and 10 in the long run. Id. at 930 fig.3, 933 fig.4.
46. The actual quotation states that the law should not allow “managers” to continue
blocking takeover bids, but managers and directors are not necessarily the same thing, and it
is directors, not executives, who have the power to redeem or maintain the poison pill. See
infra text accompanying notes 57-63.
47. Bebchuk et al., supra note 1, at 944-45.
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830 STANFORD LAW REVIEW [Vol. 55:819

Unfortunately, the mere correlation they purport to discover is not strong

enough to support the far-reaching conclusion that they draw, and their broad
prescription is no more sensible than outlawing cars to eliminate drunk driving.
Look at it this way: The Study purports to show that 47% of boards of
hostile takeover targets choose to remain independent even though
independence is not, on average, the value-maximizing choice. The
implication of this is that many, if not most, boards of directors fail, wittingly
or not, to act in the best interest of stockholders in these circumstances. Even if
this were true—and based on the foregoing I am not convinced that it is—we
must still ask the simple question: Why? Is this happening because of the
ESB?
It seems highly unlikely that the mere presence of an ESB (as opposed to
an EAT or any other takeover defense arrangement) should change the nature
or quality of board decisionmaking. Takeover defenses serve legitimate and
useful purposes, including providing a company time and leverage to negotiate
a better deal or find a better alternative, rebuff an inadequate or
opportunistically timed bid, or remain independent and pursue its long-term
business strategy—if the board determines that doing any of those things is in
the best interests of stockholders. Seen in this light, takeover defenses,
including ESBs, are tools that a board may or may not employ when confronted
with a takeover attempt, but they do not determine how a board should act in
any particular circumstance, and they do not relieve a board of its obligation to
act in the best interests of stockholders.48 Delaware law says directors can
“just say no” if they believe doing so is in the best interests of stockholders, but
it does not say that they should “just say no” in every circumstance just because
they can.49 The decision remains in the hands of duty-bound directors. And if
you trust directors to fulfill their duties, you want them to have the most
powerful tools available. This is a critical point because if it is even close to
correct, then before we take away or lessen the effectiveness of these tools for
everybody, we ought to invest some effort to find a more focused solution that
separates the users from the abusers.50

48. This view is stated well in a passage from Bausch & Lomb’s 1997 annual meeting
proxy statement and is quoted in the BC&S Study:
The staggered board does not preclude unsolicited acquisition proposals but, by eliminating
the threat of imminent removal, puts the incumbent Board in a position to act to maximize
value to all shareholders. In addition, the Board does not believe that directors elected for
staggered terms are any less accountable to shareholders than they would be if elected
annually, since the same standards of performance apply regardless of the term of service.
Bebchuk et al., supra note 1, at 901.
49. See, e.g., Unitrin, Inc. v. Am. Gen. Corp., 651 A.2d 1361 (Del. 1995); Unocal
Corp. v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985).
50. Cf. Bebchuk et al., supra note 1, at 924 (“[W]e return to our initial objective, which
is to assess the viability of the ballot box safety valve against disloyal target boards.”
(emphasis added)). Again, the BC&S Study assumes the disloyalty of the boards in the
sample, without analyzing whether this is a safe assumption to make.
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Dec. 2002] TAKEOVER DEFENSES WORK 831

BC&S would probably respond that ESBs do cause “bad” decisionmaking

by protecting incumbents from removal for a longer period of time and thereby
enabling directors to behave badly. This is only true, however, if we believe
that unrestrained directors are, in fact, motivated to act other than in the best
interests of stockholders, something BC&S presume to be true without proof.
But is this true? The BC&S Study suggests the answer lies in the fact that the
interests of managers and shareholders often diverge in the takeover context
and that compensation and other arrangements cannot be relied upon to bring
them back into alignment.51 The problem is, while this may be true for
managers (meaning executives, whose job, compensation, reputation, prestige,
perquisites, and benefits are often at risk in takeover transactions), it is hard to
see how it is true for truly outside directors.52
For this reason, at least one area we ought to examine with some care is
board composition and independence. Experience suggests that boards that are
truly independent of senior management and other insiders ultimately “do the
right thing” and use the available takeover defenses to buy time and create
leverage to find the best deal for stockholders.53 Boards that do not “do the
right thing,” on the other hand, tend to be those where the independence model
is warped by one of any number of factors, such as domination by senior
management (particularly where the CEO is also the founder or a member of
the founding family), the presence of too many insiders, other business
relationships or personal ties, or a history of personal animosity or business
rivalry between the raider and the target. Virtually every one of the classic
“horror” stories trotted out by opponents of takeover defenses falls into this
category. A popular example, discussed in some detail in the BC&S Study,54 is
the case of Circon Corporation, which rebuffed U.S. Surgical’s $18 premium
cash offer for nearly two years before ultimately selling to Maxxim Medical in
1998 for $15 per share. In that case, Circon’s CEO throughout the takeover
battle was its original founder, who appeared to regard Circon as his own alter
ego, and its fortunes as a reflection of his own performance and legacy. More
importantly, a majority of the directors had been hand-picked by this CEO and

51. See the discussion in Bebchuk et al., supra note 1, at 909. For a more extensive
discussion, though one that similarly often fails to distinguish between managers and
directors, see Bebchuk, The Case Against Board Veto, supra note 3.
52. See e.g., Unitrin, 651 A.2d at 1380 (“[I]t cannot be presumed that the prestige and
perquisites of holding a director’s office . . . prevails [sic] over a stockholder-director’s
economic interest.”).
53. There is also at least some empirical evidence for this view. See James A.
Brickley, Jeffrey L. Coles & Rory L. Terry, Outside Directors and the Adoption of Poison
Pills, 35 J. FIN. ECON. 371 (1994) (finding that the proportion of outside directors increases
the likelihood that a hostile bid target will be auctioned, and not remain independent, once a
bid has been made), cited in Bebchuk et al., supra note 1, at 925 n.120.
54. Bebchuk et al., supra note 1, at 913-14.
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832 STANFORD LAW REVIEW [Vol. 55:819

had significant personal loyalty to him.55 Indeed, after U.S. Surgical initiated
its bid, Circon’s CEO added to the board an old friend who later admitted that
he believed his primary role was to help repel the U.S. Surgical bid.56 Other
good and well-known examples include Hasbro’s rebuff of Mattel and Loewen
Group’s rebuff of Service Corporation International, both in 1996. In each of
those cases, the chairman and chief executive was a member of the founding
family, held a substantial but noncontrolling stake, and had bitter personal and
business rivalries with the suitors.
You might be surprised to learn at this point that BC&S actually agree that
the presence of a majority of truly independent directors could obviate the need
for the reconsideration of law that they would propose.57 “We agree,” they
write, “that the carrot of stock options and golden parachutes and the potential
stick supplied by independent directors may sometimes sufficiently align
directors and managers with shareholders. When this happens, we do not need
a safety valve, because even absolute power to block bids would not be
abused.”58 Through a tortured trick of logic—in which they appear to
intentionally confuse the difference between “managers,” whose professional
careers and compensation arrangements are on the line, and directors, who do
not share those interests if they are sufficiently independent—they conclude
that it would be “unwise to rely solely on these incentives to align the interests
of managers and shareholders.”59 Somehow, the reference to directors, and
particularly outside directors, simply disappears from one sentence to the
next.60 This willful confusion of managers and directors is unfortunate because
it leads BC&S to “proceed under the premise that a safety valve is
necessary.”61 In other words, they presume the need for the very remedy that
they propose,62 but they never prove it.63

55. See Brian Hall, Christopher J. Rose & Guhan Subramanian, Circon (A) (Harvard
Business School Case Study N9-801-403), at 6 [hereinafter Circon (A) Case Study].
56. Id. at 9.
57. Bebchuk et al., supra note 1, at 908-09.
58. Id. at 909 (emphasis added).
59. Id. (emphasis added).
60. While BC&S may choose to ignore the manager versus outside director distinction,
the Delaware courts appear to take this distinction quite seriously, as Professor Stephen M.
Bainbridge notes in his companion response, Director Primacy in Corporate Takeovers:
Preliminary Reflections, 55 STAN. L. REV. 791, 809-10 (2002). For example, there are a
number of situations in which a board carries its burden of proof more easily, or shifts the
burden of proof from itself to the plaintiff, when decisions are made by the independent
directors. Similarly, the Delaware corporate code itself assumes in several places that
directors who are disinterested with respect to a particular matter are able to act
independently of those directors who have a greater interest in a particular matter. See, e.g.,
DEL. CODE ANN. tit. 8, § 144 (2001).
61. Bebchuk et al., supra note 1, at 909.
62. See also id. at 924 (“[W]e return to our initial objective, which is to assess the
viability of the ballot box safety valve against disloyal target boards.” (emphasis added)).
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Dec. 2002] TAKEOVER DEFENSES WORK 833

In light of these observations, it is imperative that BC&S examine whether

the composition and independence of each of the ESB companies in their Study
that elected to remain independent differ from that of those that agreed to be
sold. Did the boards that elected to remain independent have greater
entrenchment motivation than those that did not? While some of this would be
difficult to determine objectively, the following factors certainly could be
reviewed: (1) number of insiders on the board (including executives and other
“managers,” as well as directors affiliated with the company’s lenders,
investment bank, or regular outside law firm); (2) whether the CEO and/or
chairman founded the company, took it public, or is related to the founding
family; (3) other founders or founding family members on the board; (4)
percentage of directors who were directors prior to the company’s initial public
offering (this might be a useful approximation for whether the directors are
“hand-picked,” as in the Circon case); (5) number of directors who have other
business ties to the CEO or other senior company executives; (6) the number of
directors who were nominated or identified for board service by the CEO or
other senior company executives; and (7) whether the CEO or any directors
have ever been associated with the raider, or vice versa. My suspicion is that
we will find that any truly abusive behavior is closely associated with boards
that are not truly independent and outside in the senses suggested by the
foregoing (as well as under corporate law and stock exchange rules).
This is a suspicion worth confirming, because a focus on director
independence brings the long-running takeover defense debate into alignment
with current “post-Enron” efforts to improve board performance generally. For
example, this past summer the New York Stock Exchange proposed new listing
standards for companies seeking to be listed on the exchange.64 Central
features of the proposed revisions were: the requirement that boards of NYSE-
listed companies have a majority of independent directors, that the definition of
“independent directors” be significantly tightened, and that the role and
authority of the independent directors be increased generally.65 In particular,
for a director to be deemed “independent,” the board must affirmatively

63. One interesting study, cited by Professor Bainbridge, suggests their presumption is
wrong. Professor Bainbridge notes that management-sponsored leveraged buyouts, like
unsolicited tender offers, inherently involve a strong risk of management self-dealing. If
BC&S’s presumption that independent directors are unable to separate their duties to
stockholders from their allegiance to management were correct, we would expect that
stockholder premiums in management-sponsored leveraged buyouts would be smaller than
in arms-length leveraged buyouts. However, as Professor Bainbridge notes, this is not the
case; in fact, the premiums are “essentially identical.” Bainbridge, supra note 60, at 810.
64. New York Stock Exchange, Corporate Accountability and Listing Standards
Committee, Original Recommendations (June 6, 2002), available at http://www.nyse.
com/pdfs/corporation_govrept.pdf.
65. Id. at 6-9.
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834 STANFORD LAW REVIEW [Vol. 55:819

determine that the director has no material relationship with the company.66
One of the committee members involved in developing the recommendations
for the revised standards commented that “[w]hile the vast majority of
companies in the United States act responsibly towards their investors, these
new rules will ensure that all companies listed with the Exchange live up to that
responsibility.”67 The same is true for board decisionmaking in the takeover
context.
Another reason it is worth looking at the composition and motivation of the
boards in the few “horror story” cases is because they all turn out to be
exceptional cases, whose facts should not be the premise for new or
“reconsidered” law. Take again the example of Circon,68 which is noteworthy
both for the intensity of the battle and because it provides one of the very few
examples in which the incumbent directors of a staggered board continued to
hold out against the hostile bid even after the raider won an election contest to
remove a class of incumbent directors and caused two of its own nominees to
be elected to the board.69 While this is undoubtedly a horror story (holding out
through two years of a bull market only to sell for 17% less than the initial bid),
it is also an example of the most extreme form of a runaway, nonindependent
board, not to mention a perfect expression of the maxim that hard cases make
bad law.
The difficulty of drawing conclusions from the hard cases is well
demonstrated by the saga of Weyerhaeuser’s fourteen-month pursuit of
Willamette.70 In November 2000, Weyerhaeuser made an offer of $48 per
share for Willamette. In May 2001, after raising its bid to $50 per share,
Weyerhaeuser conducted a proxy contest to remove a third of Willamette’s
staggered board, and was successful. The remaining Willamette directors
continued to oppose the bid. Ultimately, in January 2002, Willamette agreed to
be acquired for $55.50 per share, a 16% increase over Weyerhaeuser’s initial
bid fourteen months before.71 This case has been cited both as an abuse of the
ESB defense (because the Willamette incumbent directors held out despite the
preference clearly expressed by a majority of stockholders at the May 2001

66. Id. at 6.
67. Press Release, New York Stock Exchange, NYSE Board Releases Report of
Corporate Accountability and Listing Standards Committee (June 6, 2002), available at
http://www.nyse.com/press/press.
68. See supra text accompanying notes 54-56
69. See Circon (A) Case Study, supra note 55.
70. Willamette is a “hard case” because it provides an example of a board for which
the independence model had been significantly warped by a history of tremendous personal
animosity and business rivalry between the raider and the target—most notably because
Weyerhaeuser’s chairman and chief executive officer, Steven Rogel, had been president and
chief executive officer of Willamette until he “switched sides” in 1997.
71. The foregoing description of the Weyerhaeuser/Willamette story is taken from
Bebchuk, The Case Against Board Veto, supra note 3, at 1031.
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Dec. 2002] TAKEOVER DEFENSES WORK 835

election) and as a “shining example of how a staggered board and poison pill
operate to the benefit of shareholders”72 (because the ultimate deal price was
$7.50 above Weyerhaeuser’s original bid and $5.50 above the offer
theoretically “approved” by stockholders at the May 2001 annual meeting).
Professor Bebchuk has argued elsewhere that it is hard to see a 16% increase
over a fourteen-month period as a “shining example,”73 in particular because he
doubts that the Willamette’s board’s actions were really part of a bargaining
strategy, but were instead attempts to avoid a sale to Weyerhaueser at all
costs.74 His shareholder return argument is weak because the 16% return is
actually quite strong considering that during the same fourteen-month period
the S&P 500 declined approximately 21%75 and the S&P Paper & Forest
Products Group, which both Weyerhauser and Willamette use to measure their
performance,76 increased just 6.6% during the same period (and actually
declined from the time of Willamette’s 2001 annual meeting to the date
Willamette agreed to be acquired in January 2002).77 As to Professor
Bebchuk’s second point—that the Willamette board displayed an intransigence
that somehow went well beyond mere bargaining strategy—whether or not it is
true in this particular case, it ignores the fact that it is obviously very difficult to
distinguish between improper intransigence and good bargaining tactics; they
tend to look very much alike until the very end. In other words, intransigence
is not the same thing as bad board behavior, and it is a mistake to try to use one
as a proxy for the other.
In any event, the really interesting feature of the Willamette saga was the
willingness of stockholders to approve a transaction at a price that was at least
10% below what the board was ultimately able to extract from Weyerhaeuser
using the leverage provided by the ESB.78 This willingness indicates (1) that

72. Lipton, Pills, Polls, and Professors Redux, supra note 3, at 1057.
73. Bebchuk, The Case Against Board Veto, supra note 3, at 1031-32.
74. Id. at 1032-33 (“The facts appear to be at least consistent with a story of
management seeking to remain independent, and to avoid a sale to Weyerhaeuser altogether,
and agreeing to be acquired by Weyerhaueser only under massive pressure from
shareholders.”). That the board did indeed succumb to “massive pressure from
shareholders” seems a quizzical admission in light of his strongly held view that legal reform
is needed precisely because shareholder pressure does not provide an adequate disciplining
force upon directors.
75. Yahoo! Finance, at http://table.finance.yahoo.com/k?s=^gspc&g=d (calculated
using Yahoo! Finance historical price calculation for the S&P 500 from November 6, 2000,
the date of Weyerhaeuser’s first offer letter to Willamette, and January 21, 2002, the date the
two companies announced their negotiated $55.50 per share deal) (last visited Oct. 16,
2002).
76. See Weyerhaeuser Proxy Statement 13 (Mar. 6, 2002).
77. S&P Paper and Forest Products Group Index closing prices, November 6, 2000
through January 21, 2002 (supplied to author by Amir Mirza, Associate, Investment Banking
Division, Merrill Lynch & Co., Inc., from subscription data) (on file with author).
78. Indeed, in light of the relative size of the Weyerhaeuser/Willamette transaction
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836 STANFORD LAW REVIEW [Vol. 55:819

the stockholder vote is a highly crude instrument for the expression of

stockholder will, and (2) that the “fix” to Delaware law that BC&S propose,
which would essentially eliminate the board’s ability to act as a negotiating
agent for the stockholders and would essentially require the board to accept a
deal at whatever price the raider had put on the table at the time of the
stockholder vote—does not appear to be particularly well designed to maximize
returns to target stockholders, and may in fact be a significant step in the wrong
direction.
In short, it is very hard, if not impossible, to conclude from the Willamette
story that the benefit of a “ballot box safety valve” of the sort BC&S propose
would have outweighed the value of the additional bargaining power afforded
the Willamette board by the presence of an ESB. And if we cannot reach that
conclusion in this and other cases, it is hard to see how BC&S have succeeded
in proving that the benefit of ensuring the “ballot box safety valve” for a
handful of bad boards (boards that should not even exist under a proper model
for director independence) outweighs the potential harm to the delicate balance
of power between acquirors and targets that—as the conventional wisdom
suggests—works quite well for the multitude of companies that can and do
wield the ESB tool in a responsible manner.

CONCLUSION

Near the end of the Study, BC&S note that their no-ESB-in-the-face-of-a-
takeover-battle proposal is not merely a modest proposal intended to reduce the
likelihood of Circon-like horror stories, but is in fact intended to have the
“substantial consequence” of upsetting the “background” rules that influence
the outcomes of all takeover contests.79 This happens, they argue, because “the
actions of bidders and targets in all takeover contests occur against the
background of the ultimate powers and threats available to the parties.”80
Conventional wisdom—as reflected in M&A practice and in judicial opinions
over the past seventeen-plus years—suggests that these “ultimate powers and
threats” available to bidders and targets seem to have reached a reasonable
balance, if not by design, then in a rough justice sort of way. ESBs play an

relative to what I would expect to find the size of the hostile deals in the BC&S Study to be
once their data is released, it is possible that on a dollar basis, the 10% benefit to Willamette
stockholders of the ESB could all by itself outweigh the aggregate negative stockholder
returns identified by BC&S for the 21 hostile bid targets in the BC&S Study that remained
independent in the long run. For example, the aggregate transaction value of all six
contested tender offers that were completed during 2000 or pending at December 31, 2000
other than Weyerhaeuser/Willamette was $868.1 million, or just one-sixth of the $5.24
billion value of Weyerhaeuser’s acquisition of Willamette alone. MERGERSTAT REVIEW
2001, at 41 figs.1-2.
79. Bebchuk et al., supra note 1, at 947-48.
80. Id. at 948.
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Dec. 2002] TAKEOVER DEFENSES WORK 837

important role in that balance by solving a key vulnerability problem of the

pill/EAT combination, thereby ensuring a balance of power that is not sensitive
to the changes of season. BC&S have argued that the conventional wisdom is
wrong—that ESBs tilt the balance of power too far toward targets. They make
this argument in two ways. First, they purport to show that for hostile takeover
bids, the costs associated with the increased likelihood of independence
outweigh the benefits of any additional bargaining leverage that an ESB might
bring. However, as explained above, they have not actually proven this,
particularly when we move from considering the effect of the “background
rules” solely on hostile takeover contests to looking at their effects on all
merger and acquisition activity. Second, by arguing for a rule that would bind
every board in every situation, they implicitly argue that no board can be
trusted to use the ESB tool effectively.81 But they never prove this point, nor
do they invest the effort to determine whether an alternative approach, one that
would separate the users from the abusers, can be found.
In the end, all they have succeeded in proving is that ESBs can work. I
have argued that this is a good thing because ESBs are needed to plug the
important theoretical hole in the overall defensive scheme otherwise provided
by a poison pill and EAT provisions. By plugging the hole, ESBs ensure that
the balance of bargaining power between acquirors and targets does not ebb
and flow based solely on the timing of the target’s annual meeting. Until
someone provides more persuasive evidence that (1) the overall costs of ESBs
really outweigh the overall benefits and (2) there is no better way to separate
the users from the abusers, who’s to say that’s really such a bad thing?

81. For example, BC&S argue that “[r]efusing to concede after losing an informed
shareholder referendum on a bid could fairly be considered ‘arbitrary.’” Id. at 945-46. This
assumes that stockholders would never “leave money on the table” by approving a
transaction at a price substantially below what the bidder was actually willing to offer. The
Willamette story alone proves this is simply untrue. Stockholder votes are far too blunt an
instrument through which to carry out price negotiations.